Billionaire who led Sears into bankruptcy offers to buy it

Last Updated Dec 6, 2018 3:18 PM EST

Former Sears CEO and billionaire investor Eddie Lampert is now looking to buy what's left of the bankrupt retailer.

Lampert and his hedge fund, ESL Investments, said in a regulatory filing on Thursday that he plans to offer $4.6 billion in cash and stock to buy all of Sears, a move he said could save 50,000 jobs. 

"Sears is an iconic fixture in American retail, and we continue to believe in the company's immense potential to evolve and operate profitably as a going concern with a new capitalization and organizational structure," Lampert, who remains chairman of the board at Sears, said in a statement. "We believe that a future for Sears as a going concern is the only way to preserve tens of thousands of jobs and bring continue economic benefits to the many communities around the United States that are touched by Sears and Kmart stores." 

The Sears chairman and ESL own just under half of the Hoffman Estates, Illinois, company, according to FactSet.

Not enough cash?

Acceptance of the offer is not a foregone conclusion, given Lampert's stipulation the the deal would put him and ESL ahead of other creditors down the line. ESL would also be protected from liability for any of its pre-bankruptcy transactions, said one expert.

Lampert's proposed bid would be financed with more debt than cash. That could a concern for other creditors.

"ESL is the largest creditor of Sears, and their offer includes a credit bid of $1.8 billion of the debt they hold -- that's something that might be problematic going forward," Sarah Foss, a legal analyst at Debtwire told CBS MoneyWatch. 

A credit bid in a bankruptcy proceeding is a debt swap in exchange for ownership of a company. "The unsecured creditors would much rather ESL come up with a bid with a larger cash element," she said.

While current Sears shareholders have lost nearly all their investment, tens of thousands of workers have lost their jobs and creditors that include the U.S. government are owed $11 billion, Lampert has made nearly $1.5 billion to date from his Sears investment, Institutional Investor calculated in a story published this week. 

That sum could go dramatically up or down, depending on how the bankruptcy process evolves, the publication noted.

What killed Sears

Sears, which filed for bankruptcy protection in October, is currently headed toward liquidation. The once dominant retailer has been shuttering stores and laying off employees, with roughly 500 stores still in operation.  

More than a decade ago, the hedge fund manager touted his merger of Kmart and Sears as laying the groundwork for their revival, a scenario that not only didn't pan out, but had Lampert stepping down as CEO of the retailer just after its bankruptcy filing, while retaining the title of chairman.

Lampert in 2002 bought Kmart debt as the discount retailer entered Chapter 11 bankruptcy protection, and at the same time bought Sears shares, paving the way towards a merger. In 2004, Kmart said it would acquire Sears for $11 billion, with the idea being that somehow the two embattled retailers would be better off together than apart.

Yet by 2016 Sears was locked in a vicious cycle of declining revenue and mounting debt, as customers defected from stores viewed as outdated and stocked with less-than-enticing merchandise.